Econ 200

Which of the following are examples of markets?

1.) Auction websites such as Ebay 2.) touts selling tickets outside concert halls 3.) Sale of illegal arms

Upward-sloping straight line on a ratio scale graph means:

The growth rate of the GDP per capita is constant.

What does UK GDP per capita measure?

The total output of the UK's economy, dividend by the country's population

The GDP per capita of Greece was $22,494 in 2012 and $21,966 in 2013. Based on these figures, the growth rate of GDP between 2012 and 2013 (to two decimal places) was:

-2.35% (The GDP per capita changed by $21,966 − $22,494 = −$528. The growth rate of GDP per capita is given by this change as a percentage of the 2012 figure: −$528/$22,494 = −2.35%.)

Look again at Figure 2.14b which depicts the production function of grain for farmers under average growing conditions with the currently available technology. We can ascertain that:

1.) A discovery of new high-yielding crop seeds would tilt the production function curve higher, pivoted anti-clockwise at the origin. 2.) If there is an upper limit on the amount of grain that can be produced, then the curve will end horizontal for large numbers of farmers.

Dimitrios and Ameera work for an international investment bank as foreign exchange traders. They are being questioned by the police on their suspected involvement in a series of market manipulation trades. The table below shows the cost of each strategy (in terms of the length in years of jail sentences they will receive), depending on whether they accuse each other or deny the crime. The first number is the payoff to Dimitrios, while the second number is the payoff to Ameera (the negative numbers signify losses). Assume that the game is a simultaneous one-shot game.

1.) Both traders will accuse each other, even though they will end up being in jail for eight years. 2.) Ameera will accuse, whatever she expects Dimitrios to do.

Which of the following are examples of private property?

1.) Computers belonging to your college. 2.) Shares in a company

Which of the following variables have followed the so-called 'hockey-stick' trajectory—that is, little to no growth for most of history followed by a sudden and sharp change to a positive growth rate?

1.) GDP per capita 2.) Labour productivity 3.) Atmospheric CO2

Four farmers are deciding whether to contribute to the maintenance of an irrigation project. For each farmer, the cost of contributing to the project is $10. But for each farmer who contributes, all four of them will benefit from an increase in their crop yields, so they will each gain $8. Which of the following statements is correct?

1.) If all the farmers are selfish, none of them will contribute 2.) If one of the farmers, Kim, cares about her neighbour Jim is just as herself, she will contribute $10 3.) If the farmers have to reconsider this decision every year, they might choose to contribute to the project even if they are selfish.

Anastasia and Belinda's favourite hobby is to go metal detecting. On one occasion Anastasia finds four Roman coins while Belinda is unsuccessful. Both women have reciprocal preferences. From this, can we say that:

1.) If anastasia is altruistic and belinda is selfish, then anastasia may not share the find. 2.) If anastasia is altruistic and Belinda believes in fairness, then they may or may not share the find 50-50

Look at Figure 3.5 which shows Alexei's production function: how the final grade (the output) depends on the number of hours spent studying (the input). Free time per day is given by 24 hours minus the hours of study per day. Consider Alexei's feasible set of combinations of final grade and hours of free time per day. What can we conclude?

1.) The feasible frontier is a mirror image of the production function above. 2.) The marginal product of labour at 10 hours of study equals the marginal rate of transformation at 14 hours of free time.

What is the marginal rate of substitution (MRS)?

1.) The slope of the indifference curve 2.) The amount of one good that the consumer is willing to trade for one unit of the other.

In a simultaneous one-shot game:

An essential element of strategic games is that each player takes into account the possible actions of the other players, when the actual choices are unknown

MRS=MRT

MRS is the demand side of the equation while MRT is for the supply side

Brian likes going to the cinema more than watching football. Anna, on the other hand, prefers watching football to going to the cinema. Either way, they both prefer to be together rather than spending an afternoon apart. The following table represents the happiness levels (payoffs) of Anna and Brian, depending on their choice of activity (the first number is Brian's happiness level while the second number is Anna's):

Neither player would want to deviate from the dominant strategy equilibrium

Look again at Figure 1.10, which shows a graph of GDP per capita for West and East Germany, Japan and Spain between 1950 and 1990. Which of the following statements is correct?

Spain was able to grow at a higher growth rate than Germany between 1950 and 1990

An upward-sloping convex curve on a linear scale graph means

The GDP per capita, increase by a greater and greater amount in absolute terms over time, consistent with a positive constant growth rate.

Figure 2.1 shows an index of average real wages of skilled workers in London between 1264 and 2001. What can we conclude from this graph?

The average real wage increased by around 600% between 1850 and 2001.

You are a taxi driver in Melbourne who earns A$50 for a day's work. You have been offered a one-day ticket to the Australian Open for A$40. As a tennis fan, you value the experience at A$100. With this information, what can we say?

The economic rent of the day at the Open is A $10 (The economic rent of an action is its benefit minus its economic cost (out-of-pocket plus opportunity costs). Therefore, the economic rent is A$100 - A$40 - A$50 = A$10.)

Which of the following is an economic rent?

The extra profit that a successful innovator makes on bringing a new product to the market before its competitors.

Marginal rate of substitution definition:

The slope of the indifference curve represents the marginal rate of substitution: The trade-off between two goods that keeps utility constant

Crops scenario

There are two nash equilibria

Currently you work for 40 hours per week at the wage rate of £20 an hour. Your free hours are defined as the number of hours not spent in work per week, which in this case is 24 hours × 7 days − 40 hours = 128 hours per week. Suppose now that your wage rate has increased by 25%. If you are happy to keep your total weekly income constant, then:

Your total number of free hours per week will increase by 6.25% (he new wage rate is £20 × 1.25 = £25 per hour. Your original weekly income is £20 × 40 hours = £800. Therefore, your new total number of working hours is £800/£25 per hour = 32 hours. Then your free time is now 24 × 7 - 32 = 136 hours per week, an increase of (136 - 128)/128 = 6.25%.)